The Laws of Home Economics Don’t Apply To Economics

You Can Reheat a Souffle

“You can’t reheat a souffle” Paul McCartney

It looks like economics is not a dismal science after all. The Federal Reserve, via the injection of liquidity (i.e. creating money out of thin air) have proven that you can reheat an economic souffle.

Just a few short years after the stock markets and housing markets crashed, they are back up.

This time they are up not on the strength of the underlying economy, but on the strength of trillions of dollars of quantitative easing and the consumer confidence engendered by the rise of the stock and real estate markets.

In a prior post I pointed out that the economy is not healthy even though the stock and real estate markets were soaring.

People moving in and out of houses (with borrowed money) is not the foundation of a sound economy.

The unholy trinity of consumer confidence, the stock and real estate markets are not good indicators of the health of the economy and all three can be wiped out in a few minutes of trading.

Consumer confidence is a poor indicator-I am sure consumers were extremely confident back in October of 1929.

For now the markets and consumers are ignoring the real economic indicators (and the warnings of the Federal Advisory Council) as they believe that the Fed has unscrambled the egg AND reheated the souffle with it.

Betty Crocker would be proud.

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